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529 Savings Plan

posted on Thursday, December 17, 2020 in Personal Banking

529 plan

Since they were created in the ‘90s, tax-advantaged 529 savings plans have been among the most popular investment vehicles for families saving for college. Since fees for 529 funds have been declining over the past few years, the plans are even more affordable.

If you’re interested in starting a 529 Plan, here are some strategies to help you make the most of it:

  • Take advantage of tax breaks. As long as you use the money for qualified college expenses, the primary benefit of the 529 Plan is you don’t pay taxes on your investment gains. However, some states allow you to deduct or receive a credit for 529 contributions to offset your state income taxes.
  • Research your state’s plan. You can invest in any state sponsored plan, regardless of where you live. However, if your state offers a tax break, in most cases you’re better off staying in that plan as it takes years of high performance to offset the tax savings.
  • Ensure the plan has the right mix for you. Most 529 Plans offer age-based portfolios managed by a sponsor; these are the easiest choice for parents. But within those plans the asset mix can vary greatly. Make sure that as your child gets closer to college age, the portfolio’s risk decreases appropriately.

According to Reviews.com, the top 5 state plans were from Wisconsin, New York, California, Iowa, and Michigan.

Neither the publisher nor the author of this article is a registered investment adviser. Readers should seek independent professional advice before making investment decisions.

Contact our C1st Financial Advisor to learn more about 529 Savings Plans, or schedule a no-cost, no-obligation appointment to discuss your individual needs.